Getting a solid, independent development land valuation is the most critical thing you can do before advertising or negotiating with a developer if you hope to sell them your land. A development land valuation must account for planning possibilities, construction costs, viability, risk, and the expected profit a developer will need, in contrast to a normal residential or agricultural valuation. In its absence, you run the danger of either undervaluing a site that has real promise or overpricing it, scaring away serious purchasers.
In addition to providing a defensible value in the event of tax, probate, or partnership concerns, a realistic development land valuation instils confidence during negotiations, aids in selecting between outright sale, option agreements, or joint ventures, and more. This is more than just a figure; it’s a well-thought-out analysis of the land’s potential in the present market.
Learn the ins and outs of development land valuation
More than just a price per acre constitutes a proper development land valuation. This analysis takes into consideration the land’s planning status, physical limits, infrastructure, market circumstances, costs, and risks associated with delivering a scheme. It is based on the assumption of optimum development.
Among the many factors taken into account during a development land valuation are the following: the site’s dimensions, layout, accessibility, services (including water and drainage), terrain, potential for pollution or flooding, ecological or archaeological limitations, and the presence of any structures or rights of way. In addition, they will look at things like community infrastructure levies, Section 106 contributions, affordable housing, and local planning policies to see if your proposed use is likely to be approved.
It is important to note that development land valuations often use two methodologies that work together. Recent sales of comparable sites are considered using the comparable technique, which accounts for planning status, location, and timing adjustments. The residual technique determines the residual land value by subtracting the gross development value of the finished plan from all costs associated with construction, including professional fees, financing, marketing, contingencies, and the developer’s profit. The ideal course of action is to draw from both methods and combine them into a unified, value-based judgement.
A development land valuation can be performed by who?
A dependable development land valuation is not something that every surveyor or realty agent is capable of producing. Someone familiar with development appraisals, feasibility studies, and the local planning environment is required. When it comes to UK development property valuations, the gold standard is to use a chartered surveyor who is both a member of the Royal Institution of Chartered Surveyors and who consistently follows the necessary RICS guidelines.
When choosing a valuer, make sure they have experience with properties that are comparable to yours in terms of size and usage, whether it’s residential, mixed-use, commercial, or industrial. They should have no problem communicating their assumptions in simple terms and should feel at ease collaborating with planning consultants, engineers, and cost specialists as required. In order to demonstrate how the value varies when important variables like sale prices, build costs, or planning deadlines vary, a robust development land valuation will commonly reference sensitivity analysis.
Never trust a developer’s first quote or a free internet estimate without doing some additional research. The purpose of those numbers is to safeguard the buyer’s profit margin, not to determine your land’s actual worth in the market. Having an impartial, expertly-prepared development land valuation puts you on an equal footing right from the start.
Methods for identifying the most qualified expert for your site
The first step is to identify your needs. Is it a brief suggestive number for market testing or a comprehensive report for lenders, lawyers, or tax purposes that you need? You have the option to request a desktop valuation, a drive-by inspection, or a thorough site-based development land valuation with a detailed report, depending on your response.
The next step is to find surveyors or realty companies that focus on developing land specifically. Find experts in the field who have worked on development evaluations, residual valuations, viability studies, or as expert witnesses. An appropriate development land valuation can be achieved by engaging a professional with local knowledge, such as your council’s planning regulations, typical Section 106 criteria, and previous land transactions in your area.
Enquire about the methodology of prospective appraisers. The procedures for site inspection, planning, market research, appraisal, and handling risk and uncertainty should all be detailed by a qualified specialist. They need to be forthright on the final report’s structure, pricing, and expected completion date. Think about more than only the price when comparing estimates; take into account the valuer’s relevant experience and the scope of the work as well.
An excellent place to begin is with a professional organisation or a planning portal. Online directories of chartered surveyors’ specialisations are common, and some even include published case studies of their work in development land valuation. Another way to find reliable experts is to ask about amongst the accountants, lawyers, and planning consultants who frequently represent landowners for personal recommendations.
Things to keep in mind while undergoing an appraisal
Following your specialist’s instruction, the first step is to draft a brief outlining the development land valuation’s intended use, the necessary basis of value, and any specific assumptions, like the need to obtain planning permission for a certain scheme. Subsequently, a site visit will be scheduled by the valuer to evaluate the property’s physical features, accessibility, services, and any limitations that may impact the value or the likelihood of delivery.
In the background, they will look into recent land purchases for comparable evidence, examine local planning policies and any new allocations, and, when necessary, ask planning or cost specialists to verify important assumptions. To demonstrate how the development land valuation reacts to changes in sale values, build costs, or phasing, they may run many scenarios for sites with complicated viability difficulties.
Included in the final report should be a description of the location and its surroundings, an explanation of the methodology utilised, a breakdown of the assumptions and hazards that were taken into account, and a concise conclusion regarding the value. Although it will be reviewed by the developer’s valuation team, it should be prepared in a manner that even a non-specialist landowner, solicitor, or lender can comprehend.
When dealing with developers, it is important to use your development land valuation
The market will be more receptive to your offerings if you have a reliable development land valuation. An unsolicited offer’s viability, a reasonable price range to aim for, and potential deal structures to maximise return can all be determined using this information. The appraisal serves as a confidential benchmark for some landowners to evaluate proposals against, while for others it is used to determine an asking price.
You can use the appraisal to guide your buyer selection as well. Potential developers may see a site more favourably if it can accommodate a large-scale, high-density development than an infill project of a more modest scale. Customising your marketing and negotiating terms, time, and pricing are both made easier when you have a firm grasp of the fundamental value drivers. When a developer sees a development land valuation that is well-argued, it might sometimes change their original expectations for the site.
Also, keep in mind that market conditions can and do fluctuate. You should think about getting a new development land valuation midway through the selling process if it’s going to take more than a few months. This is particularly important if there are significant changes in planning policies, interest rates, or building prices. Maintaining up-to-date proof puts you in the greatest position to get the most money when you sell your land to a developer.